On April 17, 2015, our reincorporation from Florida to Nevada resulted in a one-for-100 reverse stock split. Each shareholder received one share in the Nevada corporation for every 100 shares he held in the Florida corporation. Fractional shares were rounded up to the nearest whole share, and each shareholder received at least five shares.
Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance as of July 31, 2015.
Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value. On June 12, 2015,
As of the date of this report, there are 1,000,000 shares of preferred stock outstanding. On June 9, 2015, our Board of Directors designated 1,000,000 shares as Series E. Our Series E preferred shares are subordinate to our common shares. The Series E preferred shares are ineligible to receive dividends and do not participate in liquidations. The outstanding shares of Series E preferred share have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, the holder of Series E preferred stock has 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
On June 12, 2015, we issued 1,000,000 shares of Series E preferred stock to Bloise International Corporation (“Bloise”) for compensation in a control transaction. At the time of the issuance, Bloise was a significant shareholder of the company who owned 62.2% of our outstanding common shares. Bloise is a Panama corporation whose beneficial owner is Ilya Solodov.
During the quarter ended July 31, 2015, the Company issued shares of common stock as a result of the conversion of Convertible Promissory Notes, as detailed below:
On June 1, 2015, we issued 825,872 shares of common stock upon conversion of $330,349.
On June 2, 2015, we issued 76,000 shares of common stock upon conversion of $1,520.
On June 5, 2015, we issued 72,000 shares of common stock upon conversion of $1,440.
On June 29, 2015, we issued 50,000 shares of common stock upon conversion of $1,000.
On July 8, 2015, we issued 30,000 shares of common stock upon conversion of $600.
On July 17, 2015, we issued 82,000 shares of common stock upon conversion of $1,640.
On July 23, 2015, we issued 32,450 shares of common stock upon conversion of $649.
ITEM 6. SELECTED FINANCIAL DATA
This item is not applicable to smaller reporting companies.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
Background of our Company
Aristocrat Group Corp. was incorporated on July 20, 2011 in Florida.
On April 1, 2015, the Company reincorporated from Florida to Nevada. The Company’s board of directors and majority shareholder consented to the reincorporation. Each of our shareholders on the record date received one share of the Nevada company’s common stock for each 100 shares of common stock they own in the Florida company. Fractional shares will be rounded up to the next whole share, and each shareholder will receive at least five shares. The Nevada company is authorized to issue 480 million shares of common stock and 20 million shares of preferred stock, each with a par value of $0.001 per share. The board of directors and officers of the Nevada company consist of the same persons who are currently directors and officers
On February 3, 2015, our board of directors adopted the 2015 Omnibus Equity Incentive Plan.
On October 17, 2012, we formed Luxuria Brands LLC as a wholly owned subsidiary. On January 10, 2013, we formed Level Two Holdings, LLC as our wholly owned subsidiary. On January 15, 2013, we formed Top Shelf Distributing, LLC (“Top Shelf”) as our wholly owned subsidiary.
Top Shelf is focused on developing our distilled spirits line of business and currently markets and sells RWB Ultra Premium Handcrafted Vodka (“RWB Vodka”).
Our fiscal year end is July 31.
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Plan of Operations
We believe we do not have adequate funds to execute our business plan for the next twelve months unless we obtain additional funding. However, should we not raise this capital, we will allocate our funding to first assure that all State, Federal and SEC requirements are met.
As of July 31, 2015, we had cash on hand of $7,411.
We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.
Results of Operations
We incurred a net loss of $2,178,676 for the year ended July 31, 2015. We had a working capital deficit of $642,122 as of July 31, 2015. We do not anticipate having positive net income in the immediate future. Net cash used by operations for the year ended July 31, 2015 was $1,140,506.
We continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such advances available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.
Fiscal year ended July 31, 2015 compared to the fiscal year ended July 31, 2014.
Revenue
Revenue increased to $114,433 for the year ended July 31, 2015, compared to $26,539 for the year ended July 31, 2014. The increase is primarily due to increase market awareness of our product. We have also expanded our distribution territory during fiscal year 2015.
Cost of Goods Sold
Cost of Goods Sold increased to $94,210 for the year ended July 31, 2015, compared to $25,334 for the comparable period in 2014. This is driven by the increased sales volume.
Gross Profit
Revenue increased to $20,223 for the year ended July 31, 2015, compared to $1,205 for 2014. This is due to increased market awareness of the product, expanded distribution territory, and improved gross profit margins on our vodka sales.
Sales and Marketing Expenses
We recognized sales and marketing expenses of $480,612 and $382,165 for the year ended July 31, 2015 and 2014, respectively. During the year ended July 31, 2015, we increased the number of promotional events and increased our sponsorship. This was offset by a decline in traditional advertising.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $1,079,373 and $626,125 for the year ended July 31, 2015 and 2014, respectively. This was driven by additional costs for third-party sales persons to promote RWB vodka in new geographies. It is supplemented by increased professional fees for administrative services.
Interest Expense
Interest expense increased from $365,275 for the year ended July 31, 2014 to $638,914 for the year ended July 31, 2015. Interest expense for the year ended July 31, 2015 included $492,449 for amortization of discount on convertible notes payable in the amount of, compared to $302,409 for the comparable period of 2014. This is due to both the higher average debt balances and higher conversions on our convertible debt.
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The remaining increase is due to higher contractual interest expenses on our convertible notes payable, which had a higher average balance in fiscal year 2015 than in fiscal year 2014.
Net Loss
We incurred a net loss of $2,178,676 for the year ended July 31, 2015 as compared to $1,372,360 for the comparable period of 2014. The increase in the net loss was mainly drive by increases in interest expense and professional fees.
Liquidity and Capital Resources
We anticipate needing approximately of $400,000 to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status, we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
We raised the cash amounts to be used in these activities from the sale of common stock and from advances. We currently have negative working capital of $642,122.
As of July 31, 2015, we had $7,411 of cash on hand. This amount of cash will be adequate to fund our operations for less than one month.
We have no known demands or commitments and are not aware of any events or uncertainties as of July 31, 2015 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Capital Resources
We had no material commitments for capital expenditures as of July 31, 2015 and 2014. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financing in addition to what is required to fund our present operation.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the financial statements are prepared; actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.
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USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
GOING CONERN - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended July 31, 2015, the Company had a net loss of $2,178,676 and generated negative cash flow from operations in the amount of $1,140,506. In view of these matters, the Company’s ability to continue as a going concern is dependent upon its ability to achieve a level of profitability or to obtain additional capital to finance its operations. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
New Accounting Pronouncements
For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Significant Accounting Polices: Recently Issued Accounting Pronouncements” in Part II, Item 8 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Aristocrat Group Corp.
Consolidated Financial Statements
July 31, 2015
Contents
| |
Reports of Independent Registered Public Accounting Firms
| 13
|
Consolidated Balance Sheets
| 15
|
Consolidated Statements of Operations
| 16
|
Consolidated Statement of Change in Shareholders’ Equity (Deficit)
| 17
|
Consolidated Statement of Cash Flows
| 18
|
Notes to the Financial Statements
| 19
|
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Aristocrat Group Corp
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of Aristocrat Group Corp and its subsidiaries (collectively the “Company”) as of July 31, 2015, and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for the year then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aristocrat Group Corp and their subsidiaries as of July 31, 2015, and the results of their consolidated operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered losses from operations and has negative operating cash flows, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MALONEBAILEY, LLP
www.malone-bailey.com
Houston, Texas
November 16, 2015
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Aristocrat Group Corp.
Miramar Beach, Florida
We have audited the accompanying consolidated balance sheet of Aristocrat Group Corp. as of July 31, 2014, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of Aristocrat Group Corp.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aristocrat Group Corp., as of July 31, 2014, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ GBH CPAs, PC
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
November 13, 2014
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ARISTOCRAT GROUP CORP.
CONSOLIDATED BALANCE SHEETS
| | | | | | | |
| | July 31, 2015
| | July 31, 2014
| |
ASSETS
| | | | | | | |
| | | | | | | |
CURRENT ASSETS
| | | | | | | |
Cash and cash equivalents
| | $
| 7,411
| | $
| 13,103
| |
Accounts receivable
| | | 8,585
| | | 7,770
| |
Prepaid expenses
| | | 37,103
| | | 57,168
| |
Inventory
| | | 10,365
| | | 14,906
| |
Total current assets
| | | 63,464
| | | 92,947
| |
| | | | | | | |
Fixed assets net of accumulated depreciation of $1,520 and $0, respectively
| | | 6,615
| | | —
| |
Security Deposits
| | | 1,367
| | | 1,367
| |
TOTAL ASSETS
| | $
| 71,446
| | $
| 94,314
| |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
| | | | | | | |
| | | | | | | |
CURRENT LIABILITIES
| | | | | | | |
Accounts payable and accrued liabilities
| | $
| 210,793
| | $
| 307,084
| |
Current portion of convertible notes payable, net of discount of $512,883 and $0, respectively
| | | 409,518
| | | —
| |
Current portion of accrued interest payable
| | | 85,275
| | | —
| |
Total current liabilities
| | | 705,586
| | | 307,084
| |
| | | | | | | |
Convertible notes payable, net of discount of $1,093,340 and $955,723, respectively.
| | | 49,609
| | | 70,751
| |
Accrued interest payable
| | | 44,886
| | | 12,196
| |
Accrued interest payable to related party
| | | 5,611
| | | —
| |
TOTAL LIABILITIES
| | | 805,692
| | | 390,031
| |
| | | | | | | |
COMMITMENTS AND CONTINGENCIES
| | | —
| | | —
| |
| | | | | | | |
STOCKHOLDERS’ EQUITY (DEFICIT)
| | | | | | | |
Common Stock, $0.0010 par value; 480,000,000 and 480,000,000 shares authorized; 2,010,628 and 780,418 shares issued and outstanding at July 31, 2015 and July 31, 2014, respectively
| | | 2,011
| | | 780
| |
Series E Preferred Stock, $0.0010 stated value; 20,000,000 shares authorized; 1,000,000 shares issued and outstanding at July 31, 2015 and July 31, 2014, respectively
| | | 1,000
| | | —
| |
Additional paid-in capital
| | | 3,382,525
| | | 1,644,609
| |
Accumulated deficit
| | | (4,119,782
| )
| | (1,941,106
| )
|
Total stockholders’ equity (deficit)
| | | (734,246
| )
| | (295,717
| )
|
| | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
| | $
| 71,446
| | $
| 94,314
| |
On April 17, 2015, we effected a one-for-100 reverse stock split. All share and per share amounts have been restated.
The accompany notes are an integral part of these consolidated financial statements.
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ARISTOCRAT GROUP CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | |
| Year ended
July 31,
| |
| 2015
| | 2014
| |
| | | | |
REVENUE
| $
| 114,433
| | $
| 26,539
| |
COST OF GOODS SOLD
| | 94,210
| | | 25,334
| |
| | | | | | |
GROSS PROFIT
| | 20,223
| | | 1,205
| |
| | | | | | |
OPERATING EXPENSES
| | | | | | |
Sales and marketing expenses
| | 480,612
| | | 382,165
| |
General and administrative expenses
| | 1,079,373
| | | 626,125
| |
| | | | | | |
LOSS FROM OPERATIONS
| | (1,539,762
| )
| | (1,007,085
| )
|
| | | | | | |
OTHER INCOME (EXPENSE)
| | | | | | |
Interest expense
| | (638,914
| )
| | (365,275
| )
|
| | | | | | |
NET LOSS
| $
| (2,178,676
| )
| $
| (1,372,360
| )
|
| | | | | | |
NET LOSS PER COMMON SHARE – Basic and fully diluted
| $
| (2.20
| )
| $
| (2.12
| )
|
| | | | | | |
COMMON SHARES OUTSTANDING Basic and fully diluted
| | 988,456
| | | 647,245
| |
On April 17, 2015, we effected a one-for-100 reverse stock split. All share and per share amounts have been restated.
The accompany notes are an integral part of these consolidated financial statements.
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ARISTOCRAT GROUP CORP.
CONSOLIDATED STATEMENT OF CHANGE IN STOCKHOLDERS’ EQUITY (DEFICIT)